E-commerce services negotiate bumpy road while going rural

E-commerce services negotiate bumpy road while going rural

By Dipavali Hazra | NEW DELHI | 21 May, 2016
The government’s push for digitisation has opened the doors to rural and small town India for e-commerce giants, but there are still obstacles along the way.

The government’s push for digitisation and better connectivity has opened the doors to rural and small town India for e-commerce giants. Drawn into the hinterlands by deeper internet-smart phone penetration and rising aspirations, these companies, in a reverse trade, have also signed MoUs with the government to market and promote indigenous products on their platforms as well as train village-level entrepreneurs.

According to the Internet and Mobile Association of India (IAMAI), the number of mobile internet users in India is expected to reach 371 million by June 2016.

In a population exceeding 1.1 billion, there were 306 million mobile internet users in India in December, 2015. Of the 306 million internet users, 219 million users are from urban India, which registered a year-over-year growth of 71%, while the user-base in rural India has gone up by 93% from December 2014, to reach 87 million in December 2015. Data show that 34% of rural population uses internet for e-Commerce purposes.

While developments are at a very nascent stage, experts agree the rural market has great potential. So much so that India Post, which runs an average annual deficit of $800 million (about Rs 5,500 crore), plans to turn around its fortunes by relaying cash-on-delivery parcels at its 140,000 rural post offices.

However, there are still roadblocks to rural markets. “An online transaction requires a stable internet connection of a certain bandwidth for a certain duration in order that the exchange is successfully completed. The 3G connectivity in far flung areas and sometimes even in urban centres is very poor,” said Osama Manzar, founder of Digital Empowerment Foundation, India and Manthan Awards.

Despite the upbeat data penetration figures, the World Bank’s World Development report of 2016 shows that at 1063 million, India has the world’s largest offline population. This indicates the enormous challenges the government faces in bringing affordable access to the internet for all Indians.

There are logistical obstacles too. “Due to low pin code penetration, last mile connectivity remains a distant dream. China is also faced with similar problems with logistics players struggling to keep up with the ever increasing volumes and with growth of express deliveries to wider geographical regions. The Chinese government, however, is making a concerted effort to transform the logistics industry by making last mile connectivity a reality,” said Nilotpal Dutta, Associate Vice-President, IAMAI. He added that logistics companies in India are warming up to the opportunity that the e-Commerce industry holds for them. “Consequently, they are considering deployment of dedicated teams to cater to this industry segment,” he says.

The government is also facilitating the entry of e-commerce firms by connecting them with the existing Common Service Centres (CSC), a place where villagers can access e-governance services hassle free. The CSCs were launched in 2006.

Srei Infrastructure promoted Sahaj e-village, which was set up eight years ago under the government’s initiative to promote IT-enabled services in rural areas, also plans to foray into rural distribution after fine-tuning its logistical issues. It will leverage its existing rural infrastructure to deliver products.

“Logistics can be managed. We have close to 35,000 Sahaj centres across seven to eight states. By 2017 we hope to have a network of 1.5 lakh Sahaj Mitras, who are village-level entrepreneurs who provide government to consumers and business to consumer services,” said Rohit Sehajpal, vice president of Operations, Northern region, Sahaj e-village limited.

Some logistics start-ups are also strengthening the e-commerce supply chain. Last year, Connect India raised Rs 32 crore from investor Aavishkaar to ease e-commerce firms’ entry into rural areas by connecting them with local CSCs.

According to a Nielsen report, the Indian logistics and warehousing industry is anticipated to grow at a compound annual growth rate of 10% to 12% from 2015 to 2019. Third-party logistics provider (3PL), e-commerce logistics and cold chain will continue to be the three biggest segments of the overall logistics industry. The booming e-commerce industry has also compelled logistics providers to modify their operations in order to provide a quicker — on time or same day — delivery to consumers.

Not only buyers, but village-based merchants are taking to the online medium to sell their products. “They upload their products on Facebook and various other social media to reach out to customers,” said Manzar.

On 1 May, he and his team had set up a digital products stall in a mela (fair) at Bhim, Rajasthan. “We had pen drives, tablets, old phones, solar torches, SD cards and a few other merchandise like t-shirts etc. In the first four hours we did a business of Rs 36,000. People were buying these gadgets although they had constraints. The fresh tablets were a bit beyond their budgets but they picked the second hand ones,” he said, drawing note to the level of digital awareness and “aspirations of the rural populace”.

“So, e-commerce has a market in rural India but it needs reliable connectivity to tap them,” he added.

Moreover, rural customers need to have banking facilities in order to avail e-commerce services. The government and the RBI have been working proactively to raise financial inclusion. As of 2011 Census, 54% of the 167.8 million rural households in India have access to banking services, while 67% of the 78.9 million urban people do so. To further cover all sections of society with financial services, the government is encouraging the use of mobile access for the digitisation of money to promote cashless transactions. According to Nielsen studies, up to 75% of India’s consumers are considering opening a payment bank account with their telecom service provider. The launch of payment banks by India Post in March 2017 is also expected to fill the financial vacuum.

“Thirty per cent of all shopping queries in India come from mobile phones. Almost half of the purchases by non-metro shoppers in India are done using mobile phones,” says Nilotpal. “Investment in world class mobile platforms and mobile payment mechanisms will further boost the growth of e-commerce services,” he added.


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